Posted on 03/09/2020 8:40:09 AM PDT by Hojczyk
The big news over the weekend was not the coronavirus, contrary to what you might think from watching the news. The most consequential story of the weekend is the oil price war that has broken out between Saudi Arabia and Russia. Saudi Arabia has decided to increase its production and slash its price to punish Russia for not going along with OPEC quotas designed to prop up the price of oil, which has fallen by more than half over the last few months including today’s price collapse.
(Can’t help reminding that all the certified “smart people” like John Kerry and Al Gore were telling us 15 years ago that we had reached “peak oil,” and more specifically that Saudi Arabia had likely reached its production peak and would be unable to increase its production over 10 million barrels a day. Heh.)
On the surface this Saudi move will impose significant pain on Russia, which depends on high oil prices to prop up its economy, and will also increase pressure on Iran for the same reason. Likewise American consumers, and oil-consuming sectors like the airlines, can likely look forward to some lower prices
And while the story of the Saudi-Russia feud may be entirely true, keep in mind that a protracted period of low oil prices is going to devastate America’s oil production from fracking in Texas and elsewhere. A lot of the smaller and mid-sized independent producers who have been behind a lot of the increase in domestic oil production were already under a lot of pressure from falling oil prices.
If the price stays down around the $30 level it is near today, a lot of the highly leveraged firms will default on loans or head to bankruptcy. Production will start to fall in a few months.
(Excerpt) Read more at powerlineblog.com ...
You are so lucky in the USA. I live in the highest priced region in North America. We pay converted to US dollars basically $4.00 per gallon.
Oil sands perhaps. But aren’t there other crude sources in Alberta besides those involved with the sands?
So how much of Texas oil is delivered on higher hedged contract prices?
Majority is oil sands which then works out into the pipelines. One big pipeline for example does 80% of its business via the oil sands.
Right now - the contango is steep. Not sure how much Texas is doing it but I am sure they are doing it just like everyone else
But - that doesn’t pay the bills until that product is delivered.
If it stays under $2 a gallon that is a huge shot in the arm of the US economy. I suspect that the Saudi’s and Vlad will eventually come to an understanding shortly and stabilize the cost, but with the Kung Fu Flu there is going to be a drop in demand anyway. The Saudi’s did this to themselves by totally basing their economy on oil.
Well since we are an oil exporter now, why do we have to participate in the world market? We have enough run our country, who cares what the market does. The only reason oil sets the value of our money is Richard Nixon taking us off the gold standard and letting oil set the value of our currency.
I remember when inflation wasn't even on peoples minds, then Nixon put on price controls, remember that?
Plus production cost is low-- what will temporarily cease is new fracking, which is expensive. I suspect a big price rebound as Chinese production increases.
Snort!!
Now...very little drilling at all.
Just stripper wells around here now...
Some guy's a few years ago...were drilling for what the geo guy's said was big pockets of Helium..They wore out numerous bit's...and ran out of $$$..and stopped the operation.
Everything you said...was spot on. And I'm not in the biz.........
The really irritating part was every well I invested in hit. However, most stopped producing well before the break even point.
You can drill for strippers????
Another win for the Saudi’s if Iran Government falls.
That is what they want to destroy oil patch America with bank loans a being called. This is causing the bank liquidity issues.
Russia / Saudi is our enemy
Ha!!
A stripper well is a well..at least for around here...that produces less than 100 barrels a day.
Yep..it’s a tough biz.
Trudeau has already done a great job of killing that field.
Yes but it is also the victim of low oil prices.
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